It's Time To Fix Social Security

LIVING PROOF

August 5, 2001|By Tait Trussell

The United States is one of the few major nations in the free world that has not at least partially privatized its Social Security system.

Chile, for instance, privatized its pension system 18 years ago. Workers retiring in that country enjoy an average real rate of return of 11.3 percent, compared with our system's return (the projection of the future growth in the payroll tax base) of only 1.3 percent. No wonder more than 95 percent of Chile's workers proudly own their own private pension accounts.

America's workers will be lucky to get back in Social Security checks as much as they dish out in payroll taxes over the years, and some will get less, unless the Social Security bipartisan study commission, in its final report due this fall, can persuade Congress to go for reform that will save the system.

Putting money in the securities market has allowed Chile and dozens of other countries to defuse the fiscal time bomb that faces the U.S. Social Security system. Our system is destined eventually to run short of money because it is supported by workers' payroll taxes. And in the future, fewer and fewer workers will be paying taxes to support more and more retirees, particularly when the baby boomers retire.

The bipartisan commission appointed by President Bush was greeted with a fuselage of criticism when it said in a preliminary report recently that Social Security would run out of money unless something dramatic was done.

Rash charges from critics allege that U.S. Social Security "will be ruined" if any part of payroll taxes is invested in the market. Bush has talked about 2 percent of the payroll taxes being voluntarily diverted into the market through private accounts.

Even socialistic Sweden in 1998 privatized its social pension system. Otherwise it was headed for eventual bankruptcy. Great Britain, with its privatized system, already has for its pensioners the equivalent of over $l.5 trillion in funds, while the U.S. faces eventual insolvency unless reformed.

As for the more than 57,000 Lake Countians now drawing Social Security, they face no risk of loss of benefits under any plan proposed. No influential politician has proposed cutting retirees' benefits.

We seniors are stuck with the current system. It is our children and grandchildren who can benefit from reform that allows not only higher future benefits but the ability to pass these investments along to their survivors (which is not possible with Social Security).

It is understandable in these days of yo-yo stock markets, some conclude private investment is too risky. Investment in some 401(k) company plans fell slightly this bearish year.

But these company plans, mainly invested in stock and stock mutual funds, still total $1.7 trillion for future worker retirement. For the past 80 years, the stock market has averaged annual returns of 10 percent.

The key questions are: Do you want your children and grandchildren to draw higher Social Security benefits than you get? And -- through privately invested accounts -- get future benefits between four and 10 times greater (according to Federal Reserve calculations) than what they will get without private accounts reform?